Universities and governmental agencies are by far the largest research and development machines in the United States; though it is often through the interaction of universities (or government agencies) and businesses that the public finally sees the benefits of research. Each entity brings a unique dynamic to the relationship; universities can easily form multidisciplinary relationships as well as work on basic research that has no immediate profit. On the other hand, businesses understand consumer needs and the barriers involved in taking a product to the marketplace.

Before 1980, the U.S. government retained all rights to university inventions created under federal funding. Businesses interested in using government patents were usually granted non-exclusive licenses, which their competitors could obtain as well. This created a low interest in technology transfer between the government and industry. The Bayh-Dole Act was enacted in 1980 (so named for its sponsorship in the senate by Birch Bayh and Bob Dole) to increase this technology transfer and thereby stimulate the economy. The act has allowed universities, small businesses, and non-profits the ability to patent inventions and techniques created under federal funding.

Universities now are able to generate income to fund their own research or other university endeavors. Universities make money through the issuing of exclusive patent use rights to businesses. Businesses make money by offering unique products. In the end, the government also makes money as well, through taxation of the new products created (as well as income tax from possible increased job employment through increased industry). The government also retains the right to protect the public interest through non-exclusive use of a patent.

Recently the Act has received some criticism. Critics are worried that there will be a cultural shift in universities away from basic research which has a lower profit value. Some businesses also complain that what is now being patented would have previously been given freely and that it should be given freely since the research is funded through taxes. Whatever the case, it can’t be denied that this act has greatly increased the transfer of technology from universities to businesses. It also offers a powerful case study on how the dynamics of law and business can effect commercial scientific development.